Andrew Jackson and the Second Bank of the United States

Background

• Second Bank of the US: Chartered in 1816 with a 20-year charter.
  • Acted as the government's financial agent.
  • Functions included holding deposits, making loans, regulating currency, transferring federal funds, issuing bank notes, and handling government payments and receipts.
  • Supervised by the president and Congress, yet 80% privately owned.
  • Benefited wealthy American and foreign stockholders.

Opposition to the Second Bank

• Many Southern states opposed the Bank due to poor financial management and corruption.
• Small farmers viewed the Bank as benefiting the wealthy elite and foreign investors.
• Andrew Jackson's view: Skeptical of the Bank's constitutionality and believed state, not federal control, should govern banking.

Legal Challenges

• McCullough v. Maryland: Maryland attempted to tax the Bank; Supreme Court ruled it constitutional and exempt from state tax.

Political Maneuvering

• Nicholas Biddle: Bank's director tried to renew the charter in 1832, during Jackson's reelection year.
  • Jackson vetoed the renewal, viewing the Bank as too powerful.
  • Famous quote to Martin Van Buren: "The bank is trying to kill me, but I will kill it!"
• Jackson moved most of the federal funds to state banks ("pet banks") to weaken the Bank.

Economic Impact and Policies

• Pet banks: Led to land grabs in the West and rapid inflation.
• Specie Circular (1836): Required land payments in gold and silver, not paper money.
  • Failed to stabilize the economy.

Consequences and Legacy

• Panic of 1837: Economic depression lasting into the 1840s.
  • Collapse of money system, bank failures, high unemployment.
  • Jackson's policies partly blamed.
• Political Fallout:
  • Martin Van Buren, Jackson’s VP and successor, suffered politically, losing reelection.
  • William Henry Harrison's election in 1840 marked the end of the Age of Jackson.